A BAD Money Habit I WISH I’d Broken Sooner!

We all have them and they can stop us getting our finances where we want. Here is how to recognise a bad money habit and ways to break them.

Rainy Day Money

Ever had your car break down on just the worst day for it to happen. Or your washing machine on that particular weekend when you really need it.

The truth is it often feels like the worst time because there is no good time. They are unexpected and that throws us out of pattern making it more frustrating.

There isn’t much you can do to stop it from happening but you can prepare for the cost.

The bad money habit happens when you have no plan for these unexpected events. They can lead to putting the costs on high interest cards or short term loans.

Breaking this bad money habit is pretty simple, set up an emergency fund. I like to take it a step further and have sinking funds, like separate little sections or pots in my bank, that are set aside for a specific purpose.

My approach is to have a sinking fund for the car, household appliances and even Christmas. I can adjust how much I put into each area each month based on my personal finances at the time. It’s great for peace of mind, knowing that I have money sitting there in case I need it. If the car goes wrong it takes away just a little bit of that annoyance.

Bad Spending

I really don’t like to promote massively cutting back and living a fully frugal lifestyle. There can be times it can be helpful but it shouldn’t be a long term solution to anything.

Knowing what spending you do that is unnecessary is however, a very useful bit of information. Understanding how much you are spending on your to-go coffees or lunches out at work, or takeaways on those lazy days.

Find some bad money habits you have, that maybe you’re not proud of when you see the numbers. Pick out the trends and find a work around. Some frozen pizzas in the freezer when you can’t be bothered to cook a proper meal. That sort of thing.

As for those impulse purchases many people consider the sale more if they are spending in cash. Now that we can use our phone to make most purchases it’s gotten easier and easier to casually spend money. You might even not feel like you are even spending it at the time.

Handing over physical cash just feels, well, different. You’re seeing your money go to someone else and that can make you reconsider.

Subscriptions

Do you know how many optional subscriptions do you have running at the moment? Have you ever totalled them up? According to thisismoney the average household in the UK spends £46 per month or £552 a year on subscriptions.

I am not talking about any bills like mobile phones or even tv packages like sky, which can often double that cost on its own.

The bad money habit people fall into is not considering the overall cost. Small amounts per month still add up.

A way to break the habit is to forget free trials, as they often lead to you buying the service, that’s why they offer the free trials. Of course never forget to cancel a free trial before the end to prevent paying out for something you didn’t actually want.

Another tip is to look at pausing them from time to time. Some families are choosing to cycle through various entertainment subscriptions, such as netflix and amazon prime video instead of having them all running at once.

Focusing On The Discount

I used to work in a shop and the amount of times I saw people only talk about the savings. I would even see people walk along an aisle trying to find the biggest discount. So let me ask you this. Are you saving any money?

The only way you can save money is knowing the actual value of the product, which is a whole other issue. Think about trying to figure out the value of bitcoin for example.

My point is that it is a bad money habit to buy something because of a ‘saving’. It’s lovely to feel like you’ve gotten a deal but remember that the shop has decided the price. So they are willing to accept the transaction and they are still in control.

The way to try to break this bad money habit is to ignore the savings completely. Then ask yourself if the product or service I am looking at is worth the amount they are asking. It’s a simple question and can make a world of difference to your spending.

I Will Sort It Later

The it’ll be ok i will sort it later mentality to spending often leads to a mounting credit card bill and no plan to clear it. This line of thought usually gives a false sense of how much you could or should have to spend. It’ll also stop money going into more useful places, such as future plans or emergency funds.

The bad money habit of just going for it now and thinking about it later can really lead to a bad money situation later on.

The best way to break this habit is to really know your personal finances and the best way to do that is a budget. Knowing what you have coming in, going out, emergency funds etc makes a world of difference.

I like to do a zero-based budget and this way I know what every penny is doing and I can’t spend money without a plan because it’s already been allocated.

Goals and the Future

Too many people are reactive to money issues. Something happens and then you make changes to fix it. It’s a bad habit in general in my opinion but can be detrimental to your personal finances.

So try to break the habit by having a goal and thinking ahead. Where do you want your money to be in 5 years, 10 years and what’s it going to be like when you retire. Now what stepping stones can you make to get there.

Have big and small goals and write them down. You’re more likely to achieve your goals if they are written down and even better to have actual numbers and details attached.

I’d also suggest trying to automate as much as you can. Set your savings pots to happen when you get paid, set up a budget to show how much you have left to invest or save each month.